Sweden starts on the right foot

In one sense, we can already call the newly regulated Swedish online gambling market a success. A steady stream of press releases has emanated from the Swedish Gambling Authority (Lotteriinspektionen) announcing the names of more operators which have been granted licenses.

At the time of going to press the total stood at 31 licences awarded to 28 operators and with a fortnight to go to D-Day, there will certainly be more to come before the market is launched on January 1, 2019. The big names are all ready to go, with the list as of December 18 containing such market big hitters as Kindred, Btesson, LeoVegas, Mr Green, PokerStars, JackpotJoy and bet365.

The Swedish politicians and the regulator will no doubt also have been pleased to read that Kindred chief executive Henrik Tjarnstrom telling Bloomberg that he expects the number of employees in Sweden to rise from around 300 this year to 400 next year and 700 in the next couple of years.

This employment boost can be set alongside the online gambling-derived taxation that will accrue from a greater degree of regulatory participation as well as what the authorities will view as the greater degree of consumer protection afforded by a more open online regime.

This combination of factors means it is easy to predict that the Swedish market will be hailed as a success by its architects. The tax rate – now officially the lowest in Europe for online gaming if not sports-betting – has enticed enough of the big names that the degree of leakage into what will now definitively be the black market.

Regardless of whatever revenues figures are actually achieved in the early months, it seems likely they will be greeted positively by all sides of the online gambling debate, from the politicians and the regulators through to the operators and the media beneficiaries of their increased marketing spend.

To coin a phrase, what’s not to like? Admittedly, Sweden has certainly taken its time to get its regulatory act in order. From the early days of online poker, Sweden has been a leading online grey market with very little by way of official sanctions to stop the sector growing sizeably. The ease with which the grey market emerged is evidenced by the stature of the operators and suppliers that have come from the country.

Bet365 and PokerStars apart, most of the names that head the list above have their roots in Sweden even if they currently choose to operate largely out of Malta and Gibraltar. They are market leaders and importantly they have been innovating for some time. It means that the rate of channelling from the current grey market into the regulated sphere is likely to be high.

It is for this reason that expectations for the success of the market do not necessarily encompass the possibility of sizeable revenue growth. Estimates for the current size of the unregulated and regulated market combined in 2017, for instance, vary between the semi-official estimate of SEK6.6bn to SEK8.8bn or between €650-860m.

This gives a 2017 per capita online gambling spend figure of circa €86 which compares favourably with the figure for the already regulated and analogous Danish market of €78 and a UK figure for the year to March 2018 of approximately €89.

These figures suggest that though there will be an element of the regulated market getting up to speed in the first few months, we are unlikely to see a huge market expansion on the previous estimates. The total market size come the end of 2019 is likely to be higher than the estimates for the combined grey and regulated market of 2018 by a mid-to-single digit percentage.

It could be argued, in fact, that the only way the Swedish market opening process might be deemed to have failed would be if the notional per capita online gambling spend were to rise substantially above, say, the UK or Danish figures.

That would suggest a market that had overheated.

The way the regulations have been framed seems designed to mitigate against this possibility. Hence, the various rules and regulations around bonusing, for instance, and the regulator’s clear desire for socially responsible gambling warnings to be as prominent in Sweden as it is currently in the UK.

Much as the attention of the global gambling industry is focused on the US right now, there will also be a lot of eyes on what happens in Sweden in the coming months. Both the regulator and the operaotrs will be hoping it is a success – but maybe just not too much so.